A non-payment guarantee of a portion of senior debt to a project/company. It can be made over a loan, a bond or a securitisation deal.
The proceeds of the transaction will be used to provide post-harvest liquidity to farmers, farmer producing organisations (FPOs) and small agri-enterprises, and to give them access to formal banking channels, which, in turn, will help the farmers unlock greater value for their crops.
I started my financial career in India’s agriculture sector and since then have been interested in the innovations designed to address the large-scale, systemic issues it faces.
Arya stood out as one such platform, with strong leadership, which can have a transformative impact. They were solving for two key problems – 1) whom to sell agri produce to such that farmers don’t rely solely on their local networks; and 2) when to sell to navigate a post-harvest glut in the market, avoid distress sales, and get compensated appropriately.
The deal included three solutions bundled into one – storage that minimises distress sales and help stabilise crop prices; financing for the upcoming crop season; and commerce to help farmers and farmer producer organisations access a wider market.
No development finance institution or investor has ever signed such a deal that addresses financial inclusion and climate impact in the Indian agriculture sector through a holistic solution such as Arya.
Going into the transaction, we thought credit risk would be the biggest challenge associated with the platform. But we learnt during due diligence that its operational risk was relatively bigger with respect to warehouse management and overall safety and security, especially given the remote, rural locations of the warehouses.
The solutions we have guaranteed could have been two separate financial closes, given how varied and complex each part was. We worked to aggressive timelines to close the deal, with a very lean Arya team, and I am excited about the impact it can have on India’s agriculture sector.
Absolutely! A platform like Arya is relevant for many markets in Africa and South and Southeast Asia where agriculture is an important but underdeveloped sector. A platform may not have all the same post-harvest solutions as Arya – in fact, I am aware of others who are more focused on the pre-harvest stage – but will operate in a similar ecosystem and support farmers and farmer producer organisations with secure and regular access to markets.
Internally, we are already sharing best practices with colleagues serving African markets who are in conversations with potential clients to provide capital to farmers.
While time is always a limited commodity, the team and I could have spent more time on the ground initially. That would have helped us develop a deeper understanding of the nature and scale of impact associated with the project. In turn, it could have led to smoother negotiations and easier internal discussions on what we were trying to achieve.
